UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
XQUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
September 30, 2016
OR
TRANSITION REPORT UNDER SECTION 13 OR
15(d) OF THE EXCHANGE ACT
For the transition period from to Commission file number 0-1937
OAKRIDGE HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
MINNESOTA 41-0843268
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
400 WEST ONTARIO STREET, CHICAGO, ILLINOIS60654
(Address of principal executive offices) (Zip Code)
(312) 505-9267
(Issuer's telephone number)
(Former name, former address and former fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days
{ }Yes {X}No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)
{X}Yes { }No
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
{ }Yes {X}No
Indicate by check mark, whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 or the Exchange Act.
Large Accelerated filer ___ Accelerated Filer ___
Non-accelerated filer ___Smaller reporting company _X_
(Do not check if a smaller reporting company)
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:
The number of shares outstanding of Registrant’s Common Stock on May 5, 2017, was 1,431,503.
OAKRIDGE HOLDINGS, INC.
FORM 10-Q
For the quarter ended September 30, 2016
TABLE OF CONTENTS
ITEM 1. Unaudited Condensed Consolidated Financial Statements:
(a) Condensed Consolidated Balance Sheets as of September 30, 2016
(b) Condensed Consolidated Statements of Operations for the three months ended September 30, 2016 and 2015
(c) Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2016 and 2015
(d) Notes to Condensed Consolidated Financial Statement
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
ITEM 4. Controls and Procedures
PART II. Other Information
ITEM 1. Legal Proceedings
ITEM 1A. Risk Factors
ITEM 2-4. Not Applicable
ITEM 5. Not Applicable
ITEM 6. Exhibits
SIGNATURES
PART I - FINANCIAL INFORMATION FORM 10-Q
ITEM 1 - FINANCIAL STATEMENTS
OAKRIDGE HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
|
ASSETS
|
September 30, 2016
|
June 30, 2016
|
|
Current assets
|
||
|
Cash
|
$ 214,447
|
$ 69,621
|
|
Trade accounts receivable, net
|
99,491
|
474,094
|
|
Inventories, net
|
983,485
|
1,042,484
|
|
Other current assets
|
15,188
|
11,183
|
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Deferred income taxes
|
23,000
|
23,000
|
|
Total current assets
|
1,335,611
|
1,620,382
|
|
Property, plant & equipment
|
||
|
Property, plant & equipment at cost
|
3,122,986
|
3,118,243
|
|
Less accumulated depreciation
|
(2,082,543)
|
(2,061,543)
|
|
Total property, plant & equipment
|
1,040,443
|
1,056,700
|
|
Other assets
|
||
|
Other assets
|
24,555
|
28,524
|
|
Deferred long-term income taxes
|
171,000
|
91,000
|
|
Total other assets
|
195,555
|
119,524
|
|
Total assets
|
$ 2,571,609
|
$ 2,796,606
|
See accompanying notes to the condensed consolidated financial statements
PART I - FINANCIAL INFORMATION FORM 10-Q
ITEM 1 - FINANCIAL STATEMENTS
OAKRIDGE HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
|
LIABILITIES & STOCKHOLDERS' DEFICIT
|
September 30, 2016
|
June 30, 2016
|
|
Current liabilities
|
||
|
Trade accounts payable
|
$ 493,195
|
$ 546,845
|
|
Due to related party
|
90,062
|
90,062
|
|
Due to finance company
|
82,137
|
82,905
|
|
Accrued liabilities
|
356,658
|
382,742
|
|
Current maturities of long-term debt
|
288,423
|
305,104
|
|
Deferred revenue
|
162,599
|
112,638
|
|
Total current liabilities
|
1,473,074
|
1,520,296
|
|
Long-term liabilities
|
||
|
Long-term debt less current portion
|
1,598,440
|
1,671,601
|
|
Total Long-term liabilities
|
1,598,440
|
1,671,601
|
|
Total liabilities
|
3,071,514
|
3,191,897
|
|
Stockholders' deficit
|
||
|
Common Stock
|
143,151
|
143,151
|
|
Paid-in-capital
|
2,457,975
|
2,457,975
|
|
Accumulated deficit
|
(3,101,031)
|
(2,996,417)
|
|
Total stockholders' deficit
|
(499,905)
|
(395,291)
|
|
Total liabilities and stockholders' deficit
|
$ 2,571,609
|
$ 2,796,606
|
See accompanying notes to the condensed consolidated financial statements
PART I - FINANCIAL INFORMATION FORM 10-Q
ITEM 1 - FINANCIAL STATEMENTS
OAKRIDGE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
|
Three Months Ended
|
||
|
September 30, 2016
|
September 30, 2015
|
|
|
Net Revenue
|
$ 502,174
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$ 1,406,737
|
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Cost of sales
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525,000
|
1,140,959
|
|
Gross profit (loss)
|
(22,826)
|
265,778
|
|
Operating expenses
|
||
|
Sales & marketing
|
25,356
|
25,005
|
|
General & administrative
|
97,018
|
136,006
|
|
Total operating expenses
|
122,374
|
161,011
|
|
Operating income (loss)
|
(145,200)
|
104,767
|
|
Other expenses
|
||
|
Interest expense
|
(39,414)
|
(36,249)
|
|
Total other expenses
|
(39,414)
|
(36,249)
|
|
Net income (loss)
|
(184,614)
|
68,518
|
|
Income tax benefit (expense)
|
80,000
|
(27,000)
|
|
Net income (loss)
|
(104,614)
|
41,518
|
|
Basic and diluted net income (loss) per share
|
$ (0.07)
|
$ 0.03
|
|
Weighted -average common shares used in the computation of EPS
|
||
|
Basic and diluted
|
1,431,503
|
1,431,503
|
See accompanying notes to the condensed consolidated financial statements
PART I - FINANCIAL INFORMATION FORM 10-Q
ITEM 1 - FINANICAL STATEMENTS
OAKRIDGE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
|
Three Months Ended
|
||
|
September 30, 2016
|
September 30, 2015
|
|
|
Cash flows from operating activities:
|
||
|
Net income (loss)
|
$ (104,614)
|
$ 41,518
|
|
Adjustments to reconcile net income (loss) to
|
||
|
net cash flows from operating activities-continuing operations:
|
||
|
Depreciation and amortization
|
24,969
|
17,694
|
|
Deferred income taxes
|
(80,000)
|
-
|
|
Receivables
|
374,603
|
(100,381)
|
|
Inventories
|
58,999
|
358,203
|
|
Prepaids & other assets
|
(4,005)
|
7,905
|
|
Accounts payable and due to finance company
|
(54,418)
|
(126,687)
|
|
Deferred revenue
|
49,961
|
(97,703)
|
|
Accrued liabilities
|
(26,084)
|
82,418
|
|
Net cash flows from operating activities
|
239,411
|
182,967
|
|
Cash flows from investing activities:
|
||
|
Purchases of property and equipment
|
(4,743)
|
(4,541)
|
|
Net cash flows from investing activities
|
(4,743)
|
(4,541)
|
|
Cash flows from financing activities:
|
||
|
Principal payments on long-term debt
|
(89,842)
|
(62,602)
|
|
Net cash flows from financing activities
|
(89,842)
|
(62,602)
|
|
Net change in cash
|
144,826
|
115,824
|
|
Cash-continuing operations
|
||
|
Beginning of year
|
69,621
|
55,042
|
|
End of period
|
$ 214,447
|
$ 170,866
|
See accompanying notes to the condensed consolidated financial statements
PART I - FINANCIAL INFORMATION FORM 10-Q
ITEM 1 - FINANICAL STATEMENTS
OAKRIDGE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying Condensed Consolidated Financial Statements include the accounts of Oakridge Holdings, Inc. (the “Company”) and its wholly owned subsidiary. All significant intercompany transactions and balances have been eliminated. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary to present such information fairly. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to Securities and Exchange Commission rules and regulations. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016. Operating results for the three-month period ended September 30, 2016 may not necessarily be indicative of the results to be expected for any other interim period or for the full year.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The most significant estimates in the financial statements include, but are not limited to, accounts receivable and inventory reserves, investments, depreciation and accruals. Actual results could differ from those estimates.
2 . EARNINGS PER COMMON SHARE
Earnings per Common Share (EPS) are presented on both a basic and diluted basis in accordance with the provisions of Accounting Standards Codification Topic 260 - Earnings per Share. Basic EPS is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted EPS reflects the maximum dilution that would result after giving effect to dilutive convertible debentures. The following table presents the computation of basic and diluted EPS:
|
Three Months Ended
|
||
|
September 30, 2016
|
September 30, 2015
|
|
|
Net income (loss)
|
$ (104,614)
|
$41,518
|
|
Weighted -average common shares used in the computation of EPS
|
||
|
Basic and diluted
|
1,431,503
|
1,431,503
|
|
Basic and diluted net income (loss) per share
|
(0.07)
|
0.03
|
3. COMPREHENSIVE INCOME
The Company has no significant components of other comprehensive income and accordingly, comprehensive income is the same as net income for all periods.
4. INVENTORIES
The table below summarizes information about reported components of inventory for as of September 30, 2016 and as of June 30, 2016:
|
September 30, 2016
|
June 30, 2016
|
||
|
Raw Material
|
$605,569
|
$624,011
|
|
|
Work in Process
|
377,916
|
418,473
|
|
|
Finished Goods
|
-
|
-
|
|
|
Inventory
|
$983,485
|
$1,042,484
|
5. DEBT
Long-term debt consisted of the following:
|
September 30, 2016
|
June 30, 2016
|
|
|
Note payable — bank, payable in monthly installments of $6,672including interest at6.0% with a balloon payment in January 2023. Effective June 2015, the interest rate is10% due to payment default in accordance with the terms of the note. The note is secured by the first mortgage on property owned by the Company, continuing commercial guarantees from both the Company and the chief executive officer/key stockholder and by the assignment of a life insurance policy on the chief executive officer/key stockholder.
|
$838,441
|
$844,708
|
|
Note payable — SBA, payable in monthly installments of $20,503including interest at the prime rate (as published by the Wall Street Journal) plus1% adjusted every calendar quarter(4.25% at September 30, 2016), maturing in May 2018. The note is secured by the assets of the Company and the unconditional guarantee of the chief executive officer/key stockholder.
|
396,697
|
472,145
|
|
Note payable — SBA, payable in monthly installments of $5,107, including interest and SBA fees for an interest rate of5.2% maturing March 2033. The note is secured by a second mortgage on property owned by the Company and an unconditional guarantee from both the Company and the chief executive officer/key stockholder.
|
651,725
|
659,852
|
|
Total Debt
|
1,886,863
|
1,976,705
|
|
Less current maturities
|
288,423
|
305,104
|
|
Long term Debt
|
$1,598,440
|
$1,671,601
|
The Company’s credit agreements with its bank contain certain annual covenants, which were not met at June 30, 2013 and 2014, but which weresubsequently waived by the bank. The covenants for June 2015 and June2016were not met and were not waived by the bank. However, due to the passage of time the notes have not been reclassified as due on demand as of June 30, 2016. The next covenant calculation date will be June 30, 2017.
6. RECENTLY ISSUED ACCOUNTING GUIDANCE
(a) Revenue Recognition
In May 2014, the Financial Standards Accounting Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under United States Generally Accepted Accounting Procedures (GAAP). The core principles of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP. The standard is effective for annual periods beginning after December 15, 2016 and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements and have not yet determined the method by which we will adopt the standard in 2017. The Company currently plans to adopt the standard using the “modified retrospective method”. Under that method, we will apply the rules to all contracts existing as of January 1, 2018, recognizing in the beginning retained earnings an adjustment for the cumulative effect of the change and providing additional disclosure comparing results to previous accounting standards. Upon initial evaluation, we believe the requirements of this standard will not result in a significant change to our results.
(b) Leases
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842 ” (“ASU 2016-02”), which requires lessees to put most leases on their balance sheets but recognize the expenses on their income statements in a manner similar to current practice. The standard states that a lessee would recognize a lease liability for the obligation to make lease payments and a right-to-use asset for the right to use the underlying asset for the lease term. The standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Early adoption is permitted. We are currently evaluating the timing of our adoption and the impact that the updated standard will have on our consolidated financial statements.
(c) Inventory
In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, requiring that inventory be measured at the lower of cost and net realizable value. Net realizable value is defined as estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This ASU is effective within annual periods beginning on or after December
15, 2016, including interim periods within that reporting period. We are currently evaluating the impact this guidance may have on our consolidated financial statements.
(d) Income Taxes
In November 2015, the FASB issued ASU 2015-17, “Income Taxes (Topic 740)” providing guidance on the balance sheet classification of deferred taxes. The guidance effective for fiscal years beginning after December 15, 2016 and for interim periods within those fiscal years, with early adoption permitted. We are currently evaluating the impact this guidance may have on our consolidated financial statements.
(e) Statement of Cash Flows
During August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to address diversity in how certain cash receipts and cash payments are presented and classified in the statements of cash flows. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The amendments should be applied using a retrospective transition method to each period presented. If retrospective application is impractical for some of the issues addressed by the update, the amendments for those issues would be applied prospectively. Early adoption is permitted, including adoption in an interim period. The Company does not expect the adoption of ASU 2016-15 to have a material impact on our consolidated financial statements.
7. SUBSEQUENT EVENT
On February 24, 2017, Stinar Corporation signed a line of credit agreement with Kruckeberg Industries, LLC in amount of $100,000.00. The Maturity Date of this line of credit will be March 1, 2018, with interest rate of 9%.
8. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Environmental Costs
Environmental expenditures that pertain to current operations or relate to future revenue are expensed or capitalized consistent with the Company's capitalization policy. Expenditures that result from the remediation of an existing condition caused by past operations that do not contribute to current or future revenue are expensed. Liabilities are recognized for remedial activities when the clean-up is probable and the cost can be reasonably estimated.
As requested by Kruckeberg Industries, LLC, from January 2016 to March 2016, Landmark Environmental, LLC conducted a Phase I Environmental test and a Supplemental Phase II Environmental test and revealed that areas of buried debris and impacted soils should be excavated and transported off-site for disposal to allow for future redevelopment of the Property. The quote for excavation is around $76,000. The Company is planning to do the excavation in 2017.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management’s discussion and analysis of certain significant factors which have affected the Company's financial position and operating results during the periods included in the accompanying condensedconsolidated financial statements.
Management's discussion and analysis of financial condition and results of operations, as well as other portions of this document, include certain forward-looking statements about the Company’s business and products, revenues, expenditures and operating and capital requirements. From time to time, information provided by the Company or statements made by its directors, officers or employees may contain “forward-looking” information subject to numerous risks and uncertainties. Any statements made herein that are not statements of historical fact are forward-looking statements including, but not limited to, statements concerning the characteristics and growth of the Company’s markets and customers, the Company’s objectives and plans for its future operations and products and the Company’s expected liquidity and capital resources. Such forward-looking statements are based on a number of assumptions and involve a number of risks and uncertainties, and, accordingly, actual results could differ materially for those discussed. Among the factors that could cause actual results to differ materially from those projected in any forward-looking statement are as follows: the effect of business and economic conditions; conditions in the industries in which the Company operates, particularly the airline industry; the Company’s ability to win government contracts; the impact of competitive products and continued pressure on prices realized by the Company for its products; constraints on supplies of raw material used in manufacturing certain of the Company’s products or services provided; capacity constraints limiting the production of certain products; changes in anticipated operating results, credit availability, equity market conditions or the Company’s debt levels may further enhance or inhibit the Company’s ability to maintain or raise appropriate levels of cash; requirements for unseen maintenance, repairs or capital asset acquisitions; difficulties or delays in the development, production, testing and marketing of products; market acceptance issues, including the failure of products to generate anticipated sales levels; difficulties in manufacturing process and in realizing related cost savings and other benefits; the effects of changes in trade, monetary and fiscal policies, and laws and regulations; foreign exchange rates and fluctuations in those rates; the cost and effects of legal and administrative proceedings, including environmental proceedings; and the risk factors reported from time to time in the Company’s SEC reports. The Company undertakes no obligation to update any forward-looking statement as a result of future events or developments.
FINANCIAL CONDITION AND LIQUIDITY
The Company’s liquidity needs arise from its debt service, working capital and capital expenditures. The Company has historically funded its liquidity needs with proceeds from equity contributions, bank borrowing, short term notes from officers, cash flows from operations and the offering of its subordinated debentures.
During the three month period ended September 30, 2016, the Company recorded a net loss of $104,614 compared to a net income of $41,518 during the three month period ended September 30, 2015.
For the first three months of fiscal year 2017, the Company had an increase in cash and cash equivalents of $144,826, compared to an increase in cash and cash equivalents of $115,824 for the same period in fiscal year 2016. As of September 30, 2016, the Company held cash and cash equivalents of $214,447, compared to $170,866 for cash and cash equivalents as of September 30, 2015. The Company’s net cash provided by operating activities for the three month
period ended September 30, 2016 was primarily due to the reduction of receivables of $374,603. The Company used this net cash for the three month period ended September 30, 2016 to reduce accounts payable $54,418.
Cash flow used in investing activities was $4,743 during the first three months of fiscal year 2017 and was primarily used for asset acquisitions, compared to a negative cash flow of $4,541 used in the first three months of fiscal year 2016. Net cash used for financing activities was $89,842 during the first three months of fiscal year 2017, and was used to pay down the notes payable, compared to a $62,602 from financing activity in the first quarter of prior fiscal year 2016. The remaining increases and decreases in the components of the Company’s financial position reflect normal operating activity.
The Company had negative working capital of $137,463 at September 30, 2016, a decrease of $237,549 since June 30, 2016 due primarily to reductions in receivables. At September 30, 2016, current assets amounted to $1,335,611 and current liabilities were $1,473,074, resulting in current ratio of 0.91 to 1.0, compared to 1.07 to 1.0 at June 30, 2016. Long-term debt was $1,598,440 at September 30, 2016 compared to $1,671,601 at June 30, 2016. Stockholders’ deficit was a negative $499,905 at September 30, 2016 compared to a negative balance of $395,291 at June 30, 2016. The Company’s present working capital must continue to improve in order for it to meet current operating needs.
Capital expenditures for the first three months of fiscal year 2017 were $4,743, compared with capital expenditures of $4,541 during the same period in fiscal year 2016. The Company anticipates that it will spend approximately $25,000 on capital expenditures during the final three quarters of fiscal year 2017 for equipment and building improvements for aviation ground support operations. The Company plans to finance these capital expenditures primarily through restructuring the debt.
The Company has no lines of credit facilities as of September 30, 2016. The company needs to have a line of credit.
As indicated above, the Company believes that its financial position and debt capacity are not good enough for it to meet its current and future cash requirements. Our recent operating results indicate substantial doubt exists related to the Company’s ability to continue as a going concern.
INFLATION
Because of the relatively low levels of inflation experienced this past fiscal year, and as of September 30, 2016, inflation did not have a significant effect on the Company’s results in the first three months of fiscal year 2017.
RESULTS OF OPERATIONS
FIRST QUARTER OF FISCAL YEAR 2017 COMPARED
WITH FIRST QUARTER OF FISCAL YEAR 2016
Revenue decreased $904,563 to $502,174 or 64.3%, in the first quarter of fiscal year 2017 in comparison to the prior year’s comparable period. The decrease was primarily due to both worse domestic sales and government sales.
Gross profit margin decreased 23.4% in the first quarter of fiscal year
2017, compared to the corresponding period in fiscal year 2016. This decrease was primarily due to lower sales to cover fixed cost.
Selling expenses as a percentage of sales increased 3.3% of net revenues for the comparable period. The increase of $351 in the first quarter of fiscal year 2017, compared to the corresponding period in fiscal year 2016, was primarily due to higher travel expense.
General and administrative expenses in the first quarter of fiscal year 2017 decreased $38,988, or 28.7%, in comparison to the first quarter of fiscal year 2016. The decrease was primarily to lower officer salaries.
Interest expense in the first quarter of fiscal year 2017 was $39,414, an increase of $3,165, or 8.7%, in comparison to the first quarter of fiscal year 2016.
Interest income in the first quarter of fiscal year 2017 is $0.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
An evaluation was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this quarterly report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.
(a) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the three months ended September 30, 2016, we continued to implement our remediation efforts related to the following material weaknesses reported in the Form 10-K for the year ended June 30, 2016. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.
Due to the limited number of Company personnel, a lack of segregation of duties exists. An essential part of internal control is for certain procedures to be properly segregated and the results of their performance to
be adequately reviewed.
Due to weaknesses in the Company’s financial reporting controls specifically relating to inventory, management believes there is more than a remote likelihood that a material misstatement of annual or interim financial statements would not be prevented or detected, as happened with our 2009 — 2012 annual financial statements.
Due to the lack of expertise and personnel for financial reporting, the Company was not able to file required financial reports on time.
The Company did not have effective controls to provide reasonable assurance as to timely account reconciliations. Management believes that there is a more than remote likelihood that a material misstatement of annual or interim financial statements would not be prevented or detected in a timely manner. Management plans to update management plans in an effort to reduce the risk and material misstatement of the financial statements.
As a result of the remediation efforts noted below, there were improvements in internal control over financial reporting during the three months ended September 30, 2016 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. There were no other changes in internal control over financial reporting (as defined by Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
(b) REMEDIATION ACTIONS
In response to these material weaknesses, we developed remediation plans to address the control deficiencies identified in fiscal year 2015. We continued to implement the following remediation actions during the three months ended September 30, 2016:
Segregation of duties
• Engaged a third party specialist for advice and consultation
• Provided training and education to different accounting functions
• Established review controls
Financial reporting control
• Provided training for calculating the cost of raw material, work in progress, and finished goods.
• Completed review of the Company's critical accounting and internal control policies with third party advisors that are knowledgeable regarding GAAP and internal controls
• Provided training and education relating to accounting for modifications and extinguishments
• Hired third party advisors to assist in preparing consolidated financial statements
In addition to the above steps, management intends to continue its remediation efforts by:
• Provide ongoing training and education relating to GAAP around complex and non-routine transactions specifically identified through regular review of emerging issues and Company business activities
• Completing our review with the assistance of a third party advisor of
the Company’s financial reporting controls and implementing recommended control procedures to strengthen the Company’s control procedures in areas which involve significant judgements and estimates, which involve application of complex accounting methods under GAAP, or which could have a material impact on the accuracy of our financial statements.
We are committed to a strong internal control environment, and believe that, when fully implemented, the remediation actions described above will represent significant improvements in the Company’s accounting and financial reporting functions. The Company anticipates that it will complete its testing of the additional internal control processes designed to remediate these material weaknesses during the balance of 2017. We will continue to assess the effectiveness of our remediation efforts in connection with management’s future evaluations of internal control over financial reporting.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is from time to time involved in the ordinary course of litigation incidental to the conduct of its businesses. The Company believes that none of its pending litigation will have a material adverse effect on the Company’s businesses, financial condition or results of operations.
ITEM 1A. RISK FACTORS
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURE
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS
The following exhibits are filed as part of this Quarterly Report
on Form 10-Q for the quarterly period ending September 30, 2016:
3(i) Amended and Restated Articles of Incorporation, as amended (2)
3(ii) Amended and Superseding By-Laws of the Company, as amended (2)
31 Rule 13a-14(a)/15d-14(a) Certifications
32 Section 1350 Certifications
100 XBRL-Related Documents
(1) Incorporated by reference to the like numbered Exhibit to the Company’s Current Report on Form 8-K filed with the Commission on February 7, 2011.
(2) Incorporated by reference to the like numbered Exhibit to the Company’s Annual Report on Form 10-KSB for the fiscal year ended June 30, 1996.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Oakridge Holdings, Inc.
/s/ Robert C. Harvey
Robert C. Harvey
Chief Executive Officer
Principal Accounting Officer
Date: May 5, 2017
INDEX TO EXHIBITS
DESCRIPTION METHOD OF FILING
3(i) Amended and Restated Articles of Incorporation of the Company (incorporated by reference)
3(ii) Amended and Superseding By-Laws of the Company, as amended (incorporated by reference)
31 Rule 13a-14(a)/15d-14(a) Certifications (filed electronically)
32 Section 1350 Certifications (filed electronically)
100 XBRL-Related Documents (filed electronically)
EXHIBIT 31
RULE 13a-14(a)/15d-14(a) CERTIFICATIONS
I, Robert C. Harvey, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Oakridge Holdings, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and I have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 5, 2017
/s/ Robert C. Harvey
Robert C. Harvey
President, Chief Executive Officer,
Chief Financial Officer, Principal Accounting Officer and
Chairman of the Board of Directors
EXHIBIT 32
SECTION 1350 Certifications
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned certifies that this periodic report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in this periodic report fairly presents, in all material respects, the financial condition and results of operations of Oakridge Holdings, Inc.
Date: May 5, 2017
/s/ Robert C. Harvey
Robert C. Harvey
President, Chief Executive Officer,
Chief Financial Officer, Principal Accounting Officer and
Chairman of the Board of Directors